Please stop comparing the price of one bitcoin to the price of one ounce of gold

TL;DR: One bitcoin is to all bitcoins what 364 troy ounces of gold are to all gold. At the time of writing, one bitcoin is worth $1,181, whereas 364 troy ounces of gold are worth $458,276. What does this mean? I don’t know, but it is better than comparing the price of one bitcoin to the price of one troy ounce of gold.


Bitcoin and gold are similar in certain ways. They are both distributed, decentralized, and implausible to counterfeit. The ongoing supply of both is limited. And in both cases it’s hard to pin down whether each is a currency, commodity, or something else entirely.

There are many fascinating differences between Bitcoin and gold. While Bitcoin is at the absolute bleeding edge of financial technology, gold is one of the most ancient ways to represent value. Bitcoin is easy to move, gold is difficult. All Bitcoin transactions are openly tracked for all eternity, not so with gold.

So it’s easy to see why so there’s so much discussion about Bitcoin and gold. They are so alike, yet so different, and it’s endlessly interesting to explore this contradiction.

But… can we PLEASE STOP COMPARING THE PRICE OF ONE BITCOIN TO THE PRICE OF ONE OUNCE OF GOLD? This comparison makes no sense. It’s worse than just apples to oranges, it’s apples to diesel engines.

From what I can tell, there seems to be a general understanding in the financial media that there is no meaning in comparing stock prices. I have never seen an article suggest that Apple’s a little bit behind because AAPL’s at a measly $136 and GOOG’s at a big $829. But somehow it seems that this understanding goes right out the door when Bitcoin and gold come up!

I understand that a financial comparison between the two is too tantalizing to avoid. So what kind of comparison could we do that might have at least a little tiny bit of real meaning? Well, I’m not an economist, so I’ll just have to make some shit up. First, we’ll need some facts:

CURRENCY IN CIRCULATION TOTAL TO MINE
Bitcoin 16,184,050 bitcoins (according to blockchain.info) 20,999,999.9769 bitcoins will ever be mined
Gold (metric tonnes) 183,600 t (142,000 t estimated in 2000, + 2,600 t/yr, USGS estimates) 272,600 t will ever be mined (89,000 t below ground, USGS estimates)
Gold (troy ounces) 5,902,877,149 oz t 8,764,293,632 oz t

So what does this data tell us? Well, first of all we can see that there are a lot more troy ounces of gold out there than there are bitcoins. Looking at what’s currently in circulation, we can see that for every bitcoin there are about 364 troy ounces of gold. A long time from now, when both Bitcoin and gold are totally mined out, the ratio will be closer to 417 bitcoins/troy ounces of gold. (Well, that’s assuming that Planetary Resources is not successful within the same timeframe.)

For brevity, in the rest of this post I will focus on what’s currently in circulation. There is interesting analysis to be done on the mining rates of each currency and how they vary over time, etc, but that’s something for a separate post.

When one owns a single bitcoin, one controls about one sixteen-millionth of all bitcoins in existence. When one owns a single troy ounce of gold, one controls about one six-billionth of all troy ounces of gold above ground. Obviously as a fraction of the whole, a troy ounce is tiny compared to a bitcoin!

As of the time of writing, one bitcoin is worth about $1,181 and one troy ounce of gold is worth $1,259.

So how much would it cost to own one sixteen-millionth of all gold (i.e. the same fraction that one bitcoin is of all bitcoins)? Since there are 364 troy ounces of gold per one bitcoin, it would cost 364 * $1,259 = $458,276.

Contrasted with the meaningless comparison of the price of one bitcoin to the price of one troy ounce of gold, I think this number might have at least a little bit of meaning. I can’t really speculate on what that meaning might be, though.

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